Energy cost 'may double'
Sunday 26 June 1994
Estimates from both within and outside Nuclear Electric - which put its case for privatisation to the Government last week - show that there will have to be huge increases in prices to attract private investment into the business.
And if the state-owned firm, which runs all the nuclear power stations in England and Wales, succeeds in replacing existing capacity with new plants, consumers may eventually have to pay double the pounds 1.18bn they now provide each year to subsidise nuclear power.
In addition, Nuclear Electric wants the Government to free it from the 'unprivatisable risks and liabilities' of its six ageing Magnox reactors - which may well increase the cost to the public even more.
The firm is pressing for rapid privatisation because it realises that the Government will never again finance the huge cost of a new nuclear power station. It says: 'The company can and should be privatised at the earliest opportunity.'
Its proposal - made in a four-volume submission to the Government's Nuclear Review, which will decide the future of the industry - will be taken seriously by ministers because the firm has done startlingly well since being set up in 1990. It has increased its output by almost 45 per cent, doubled productivity - and cut 4,500 jobs. It has increased its market share from 16 per cent of the electricity sold in England and Wales to 23 per cent, and has dramatically reduced the number of accidents at its reactors.
Yet the average home still subsidises nuclear power by an estimated pounds 54 a year. In all, this hand-out, which is supposed to end in 1998, will total pounds 9.2bn.
Between 1975 and 1988 the UK Atomic Energy Authority alone received more than pounds 10bn (at 1986-7 prices), compared with only about pounds 156m for research on energy conservation and pounds 154m for all renewable sources - such as solar, wind, tide and wave - put together.
For years, as the nuclear industry now admits, atomic energy was also heavily subsidised by coal-fired electricity, even though the Central Electricity Generating Board and ministers insisted that it was cheaper to get electricity from the atom than from coal.
Nuclear Electric was set up, complete with generous subsidy, after it became clear the power stations were unsellable. Michael Heseltine, President of the Board of Trade, has said that 'the subsidy is to deal with the decommissioning of old and unsafe plants' and Nuclear Electric added that it was 'not intended to be a subsidy for our ongoing commercial operations'. But the firm has admitted spending pounds 2bn of it on building its new Sizewell B Pressurised Water Reactor.
Nuclear Electric now wants to build twin reactors next door at a cost of pounds 3.5bn, but realises that this requires private capital. It admits that electricity bills will rise because investors will require an 11 per cent return on their capital, compared with 5 per cent by the state. It estimates that electricity from Sizewell C will cost 3.7p per unit - much more than the average cost of 2.4p for electricity and 3.1p for nuclear electricity.
Dr Gordon MacKerron, one of Britain's leading experts on the costs of power generation, says that the eventual figures will be much higher. 'Nuclear Electric has set out to get the numbers as low as they can squeeze them. They are neither plausible nor credible.'
An unpublished report by the Hoskyns Group of management consultants, financed by British Coal, estimates that electricity from Sizewell C could cost between 5.82p and 7.35p per unit. A Greenpeace study estimates that the public could have to pay a pounds 2.37bn subsidy if Nuclear Electric supplied a quarter of the country's electricity from new stations.
Nuclear Electric says nuclear power deserves such special treatment because it will help provide security of supply and because reactors do not produce the pollution that cause acid rain and global warming.
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